Americans are drowning in medical debt thanks to the economic downturn, rising medical prices, and billing errors, according to a new study by NerdWallet.
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For the study, researchers analyzed federal data from CMS and spoke with officials from the Association of Credit and Collections Professionals. They also commissioned an online survey conducted by Harris Poll and completed by 2,016 adults from Aug. 13 to Aug. 15.
The researchers found that 38% of consumer debt was health care-related, making it the most significant form of debt for U.S. residents. In fact, medical debt collected by third parties is about three times higher than bank and credit card debt combined.
This year, medical debt collectors will contact nearly a fifth of Americans. In 2012, such collectors recouped $21 billion from consumers.
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Pat Palmer, founder of Medical Bill Advocates of America, says mistakes in medical billing can be a big source of medical debt. In 20 years, his organization has saved his clients more than $100 million—most due to hospital billing errors, overcharges, and incorrect insurance reimbursements. "Over 80% of the medical bills clients send to us have errors...Why is our system so complicated that regaining health means losing financial well-being," Palmer says.
"Many Americans think they are getting the best care in the world, and yet the American household is more indebted to the medical system than ever before," says study author Christina LaMontagne.
Researchers recommend that consumers use transparency tools, take advantage of no-cost state support for contesting medical bills, hire medical bill advocates, and self-audit their medical bills for errors.
This year's study follows 2013 findings from NerdWallet that medical debt is the leading cause of personal bankruptcy (Shinkman, Payers and Providers, 10/9 [subscription required]; LaMontagne, NerdWallet, 10/8; News Medical, 10/8; Khazan, The Atlantic, 10/8; Ehley, The Fiscal Times, 10/8).
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